SmartFinancial (NASDAQ:SMBK) Has Announced A Dividend Of $0.08

SmartFinancial, Inc. (NASDAQ:SMBK) will pay a dividend of $0.08 on the 28th of August. This payment means the dividend yield will be 1.3%, which is below the average for the industry.

See our latest analysis for SmartFinancial

SmartFinancial's Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for only 4 years, SmartFinancial does not have much of a history being a dividend paying company. While it has a shorter history of paying out dividends, SmartFinancial's payout ratio of 11% is a great sign for current shareholders, as this means that earnings greatly cover dividends.

Looking forward, earnings per share is forecast to fall by 14.1% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 17%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

SmartFinancial Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.20 in 2019 to the most recent total annual payment of $0.32. This means that it has been growing its distributions at 12% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that SmartFinancial has grown earnings per share at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

SmartFinancial Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for SmartFinancial that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.